Keystone's Miday Market Action 10/10/12; Beige Book

AA kicked off the earnings season last evening and lowered estimates moving forward.  YUM reports lackluster Chinese KFC sales but Taco Bell is carrying the water especially in the States. Folks love their taco's, especially cheap ones, so YUM is receiving love. On a comical note, perhaps toilet paper sales wil increase as a result of higher Taco Bell sales? CMI cuts sales and profit forecasts and tells 1500 workers to pack their bags and get out. If diesel engines are not needed, such as those going into CAT earth movers, then construction is weak which indicates a weak overall economy. Watch AAPL today as described in this morning's charts. AAPL leads the Nasdaq which leads the markets. In strong markets the COMPQ and RUT (small caps) should lead the markets higher, in weak markets, tech and small caps lead lower.

The utilities sector will continue supplying drama.  Watch UTIL 481.36 all this week. As long as UTIL stays under 481.36, the market bears are fine.  If UTIL moves above 481.36, the bulls are regaining control of the markets and will send the SPX higher.  Three other areas of interest have now surfaced due to the bearish market action; VIX 16.90, JJC 46.35 and RTH 44.50. All three are contributing bullishly to markets currently. If price moves thru any of the three levels shown, that will create market negativity and cause the broad indexes to take a leg lower. If two of the three fail, that will create two strong legs lower, if all three turn bearish, the SPX will be at the low 1400's.

For the SPX which closed at the 1441 lows, a tiny smidge of negative futures is all that is needed to accelerate the SPX lower after the opening bell. The futures are flat teasing each way of the flat line.  The bulls need to recover yesterdays down move and tag 1456, a formidable task but not impossible by any means. A move thru 1442-1455 is sideways action today. The markets may need a rest day to analyze the market move lower as well as the loss of tech leadership.

To keep it simple for Keystone's simple mind, bulls are back in biz with UTIL moving above 481.36. Otherwise, the bulls got nothing.  The bears need to either move the VIX over 16.90, the JJC under 46.35 or the RTH under 44.50 and a strong downward market acceleration will occur and there will be no question that the market bears are in firm control.  Watch the 200 EMA on the 60-minute chart at 1440.84 which would open the door to Hades should it fail. Watch the COMPQ versus SPX relationship to see which way tech wants to lead today.  A market pivot point will occur at 2 PM upon release of the Beige Book. The euro is 1.2882, at the top end of the bull-bear range at 1.2830-1.2880.  Below 1.2830 is bear friendly, above 1.2880 is bull friendly. The euro moves in the same direction as the broad indexes.

Note Added 10/10/12 at 10:08 AM:  The 200 EMA on the 60-minute chart failed, that is very bearish for markets, watch to see if it holds under 1440.82. UTIL is 478.50 firmly keeping the market bears in charge.  The VIX, JJC and RTH, however, cannot add to the downside gusto as yet.  The Nasdaq is green and thus leading the broad markets on the bull side today, this is why the bears do not have oomph. COMPQ is flat. SPX is down -0.14%, watch to see if tech can catch up to the downside, or not. SPX S/R is 1446, 1444, 1441, 1440, 1438, 1435, 1433, 1431, 1429, 1427 and 1424. The lower BB on the SPX daily chart is 1433, one of the support numbers listed.  The 50-day MA is 1426 another important level to watch.  AAPL is 640.45.

Note Added 10/10/12 at 12:42 PM:  The VIX is printing the highs for the day at 16.56 now only pennies away from the 16.90 level that will verify and unleash further market selling. JJC and RTH are remaining elevated in the bulls camp. UTIL is under 478.33, well under 481.36, which keeps the markets weak and bear-friendly. The SPX is now only nine points away from the 50-day MA at 1426. As listed previously, 1424 is also uber strong support. SPX is now testing the 1433 support.

Note Added 10/10/12 at 12:56 PM:  SPX 1433 failure.  Next support 1431. Kick 'em down the steps. VIX 16.60...... 16.65.....whoa ...... 16.69 .... hang on, attach helmets.

Note Added 10/10/12 at 1:00 PM:  VIX 16.70....... 16.73 ...... keep pushing ...... SPX 1431.38, see if the 1431 support fails, or not.  Dow Industrials are now down over 100.

Note Added 10/10/12 at 1:10 PM:  VIX is at 16.76 only fouteen cents away from allowing the bears to bring out the big selling guns. The 10-year note yield drops to 1.70% from 1.74% this morning, a large drop, in the disinflationary direction, as would be expected during a market selloff. Yield down means bond and note prices are up as money moves from stocks to bonds. Oil is 91.88 on the negative side today pulling back strongly. SPX 1431 support is holding into the Beige Book within the hour which will create a pivot point.  Watch the VIX as a guide, if 16.90 is hit, now at 16.72, the markets will take a large leg lower definitely down to test the SPX 1424-1426 level. COMPQ is -0.44% while SPX is -0.57% so tech is not leading the downside, this is why today continues along in fits and starts.

Note Added 10/10/12 at 1:52 PM:  The broad indexes take a mini gap down. What happened? Did some traders receive the Beige Book ahead of time? VIX pulled back to 16.40. The 10-year note yield is now 1.69%. The euro is stubbornly elevated at 128.90. The SPX is moving thru the 1331-1333 zone.

Note Added 10/10/12 at 1:58 PM:  The 10-year yield is now 1.68%. Time to open the Beige Book and look inside.

Note Added 10/10/12 at 3:04 PM:  The broad indexes are printing near the day's lows but the VIX is at 16.29 no longer threatening 16.90.  The RTH and JJC remain bullish.  The Beige Book resulted in an upwards markets spike and lower VIX spike.  The SPX has now fallen back down but the VIX remains low. Tech continues to not lead lower which also holds back the bears today. The SPX is moving along the 1435, 1433 and 1431 S/R levels.

Note Added 10/10/12 at 3:48 PM:  Typically, markets do not place bottoms on a Wednesday. If the SPX is down from 8 to 10 handles or more, about 80% of the time the SPX will print lower lows on Thursday morning.  Over the last couple years, the dozen or so times this has occurred all did provide lower lows except two, and those two times were recently, with the action over the last three months. In other words, the odds say a lower low should print for the indexes in the morning.

Note Added 10/10/12 at 3:58 PM:  Keystone added more DNDN.

Note Added 10/10/12 at 4:15 PM:  The bears are in charge but were limited in the move lower since tech would not lead downwards today. Also VIX would not move above 16.90 and JJC would not drop under 46.35 so the bulls were able to hold back a major move lower, at least for today. Utes remain weak well under 481 so the markets will remain weak overall. Tomorrow is the five-year anniversary of the highest number every printed for the broad markets, the SPX, on 10/11/07 at 1576. Tuesday was the five-year annivesary of the closing all-time high on 10/9/07 at 1565. Check the CPC, BPSPX and NYMO charts this evening. The TRIN closes at 1.5 today indicating steady-eddy non panic style selling, the type of selling that tends to continue along.

Note Added 10/10/12 at 5:00 PM:  S&P rating agency downgrades Spain two notches with a negative outlook.  This is interesting since the markets were actually waiting for Moody's to downgrade Spain. Watch the euro now at 1.2874.....1.2872......

Note Added 10/10/12 at 5:11 PM:  Euro 1.2863.... 1.2865 ... so the downgrade did add to market weakness perhaps placing a lower low tomorrow morning even more likely. The euro and S&P's move in the same direction.

Note Added 10/10/12 at 6:06 PM:  Euro 1.2851 ..... 1.2846 .......